Do you think it might be possible that we’ve accidentally induced hyper-inflation in higher education?

(Guest Post by Matthew Ladner)

I mean maybe? Just a little bit? Massive direct and indirect subsidies and encouragement to take on debt creates Baumol’s cost disease on steroids. Oh and by the way, take a look at that mid-aughts increase in housing prices, and then compare that to the higher education bubble, and consider all the trouble the housing bubble caused.

Post navigation

9 Responses to Do you think it might be possible that we’ve accidentally induced hyper-inflation in higher education?

Same trap in education and health care: we want to provide services to the poor so we invent a substitute for allocation of services by the price system. The new system of allocation is even less responsive to the poor than the price system because it is responsive to power rather than money, and the poor don’t have much money but they have even less power. Meanwhile, the system becomes a bigger and bigger money blob, feeding the special interests who have the power to seize control of the gravy train.

Provide services to the poor through a direct subsidy that gives them extra money to spend within the standard price allocation system, and all this vanishes like a bad dream upon waking. Yes, you will always have problems with any social system, but the poor will actually get services. Food stamps have problems but they clearly do get grocery stores to respond to poor people’s needs and provide them with services – and they don’t create much of a parasitic blob.

The story of federal housing subsidies before and after the Kemp reforms of the early 1990s could almost have been written by an epic poet to illustrate the point.

And does anyone think that higher education quality has improved, as has that of many of the other items on the chart? Tuition increases are diverted to serve the quest for ever-higher academic prestige, not to educate students broadly and effectively.